Exchange Fees

A California Superior Court judge yesterday ordered VISA and MasterCard to refund more than $800 million in foreign currency conversion fees to cardholders. The court also ordered the card associations to amend their operating rules to require their issuing members to make effective disclosure of the currency conversion fees charged to consumers. Judge Ronald Sabraw found that VISA and MasterCard violated California’s unfair competition law by failing to adequately disclose the currency conversion fees they have charged to U.S. cardholders. However Judge Sabraw also found that VISA and MasterCards currency conversion process does not violate Truth-In-Lending regulations, nor is it in any way unconscionable. Nevertheless, VISA, which is headquartered in California, was ordered to refund the one percent currency conversion fees to all cardholders in the USA who paid the fees from February 15, 1996 to the present. MasterCard, which is headquartered in New York, was ordered to refund the currency conversion fees to all its California consumers who paid the fees during the same period. The court ordered the card associations to devise a plan of restitution by April 28th. VISA and MasterCard quickly responded last night saying they will appeal the decision. VISA said it was disappointed by the court’s decision particularly since the judge himself acknowledged that the process is “uniquely beneficial” to consumers as cardholders receive currency conversion rates that are favorable to their other conversion options. MasterCard said the judge’s decision sends a chilling message to the business community that if you do business in California, you cant rely on existing laws, and you could be subject to sanction based on previously unknown notions of commerce and jurisprudence. MasterCard also said that mandating how its members disclose the currency conversion process to their customers is usurping authority that properly resides with federal authorities, who regulate financial disclosure.

Details

TSYS Fraud Fighter

TSYS has teamed with PAR3 Communications to offer automated notification technology for possible fraudulent credit/debit card activity. The new “TSYS Notification” service will notify the consumer by telephone, e-mail or any wireless device at the first signs of fraud. After TSYS gauges a transactions veracity with its “CardGuard” fraud detection system, “TSYS Notification” immediately sends a detailed, automated phone message that requests the customer to verify the transaction. It then offers the customer several sophisticated response options: the customer could confirm the purchase, forward the information to other users on the account or connect to a CSR to discuss the transaction in more detail. The customers responses are immediately updated in the processing system. Email capability will be added later. “TSYS Notification” is also available in Spanish and Canadian French.

Details

Acquisition Costs

The average cost to acquire a credit card account in the USA is now $78, with a range between $10 per account and $230 per account. With response rates for direct mail credit card solicitations dipping as a low as 0.3%, the cost can reach as high as $115 per account. By contrast, Internet marketing with response rates for credit card applications exceeding 2.0%, the costs range between $10 per account and $45 per account. The findings come from a research report released yesterday by CA-based RK Hammer Investment Bankers. Hammer found that accounts acquired through portfolio acquisitions are the most expensive while accounts picked up through agent banks are the least expensive.

CREDIT CARD ACCOUNT ACQUISITION COSTS
(costs include marketing, bureau expense, credit processing,
and card issuance)
Per Acct Response
Portfolio Acquisition $40-$230 NA
Direct Mail $95-$115 0.3%-0.7%
Pre-Approved $70-$90 0.6%-1.8%
Telemarketing $60-$70 3.0%-6.0%
Pre-App + Tele $50-$60 4.0%-5.0%
Internet Applicatio n $10-$45 0.6%-2.1%
Agent Banks $10-$40 1.2%-2.6%

Source: RK Hammer Investment Bankers

Details

PCCharge AmEx PIP

GO Software, Inc., a subsidiary of Return On Investment Corporation, announced the immediate availability of American Express Plural Interface Processing in its award-winning payment processing software, PCCharge Pro. The availability of American Express PIP in PCCharge Pro saves merchants money by allowing direct settlement of credit card transactions to American Express, avoiding fees charged by third party processors for routing these transactions.

Details

INFRARED PAYMENTS

A new pilot to test an infrared credit card payment service in Tokyo using DoCoMo mobile phones with IrDA ports is being launched in June. VISA International, Nippon Shinpan, OMC Card, AEON Credit, and, NTT DoCoMo have teamed for the project. The pilot will have two phases. In the first phase, Nippon Shinpan and DoCoMo will focus on technical evaluations of the service, including communication formats, payment methods and user operability. Nippon Shinpan will select 3,000 VISA cardholders and provide infrared-payment terminals to about 500 merchants. In the second phase, which begins this autumn, OMC Card and AEON Credit Service will join the pilot program to recruit more users and expand the range of participating merchants, bringing the pilot program closer to full commercialization. The pilot leverages a DoCoMo “i-áppli” application for payments based on the “VISA Proximity Payments Messaging Specification”. Credit card data is downloaded and then stored in the DoCoMo “504i” and “504iS” mobile phones. There are about eight million owners of DoCoMo “504i” and “504iS” mobile phones which are standard-equipped with an IrDA port to exchange information with other IrDA-equipped devices via an infrared signal.

Details

Card Rescue

The Financial Supervisory Service of South Korea says major companies and banks have agreed to raise approximately $3.6 billion to fend off potential bankruptcy in their credit card subsidiaries. Also, government-run Korea Asset Management plans to buy between $4 billion and $5 billion worth of bad credit card loans. The card problems were first reported on March 18 by The RAM Report ([www.ramreport.com][1]). The Korean credit card industry has been hit hard by an economic crisis as well as an accounting scandal at SK Global. SK allegedly inflated its 2002 earnings by $1.2 billion. The FSS reported that card payments, 30+ days overdue, increased 23% to $6.3 billion in January from $5.1 billion in December. Credit card issuers lost a total of $207 million in 2002. In January, credit card losses topped $326 million. The Ministry of Finance and Economy, the Financial Supervisory Service, and the Bank of Korea said it will also require credit card companies to reduce operating expenses and boost capital. Some card issuers have indicated they will reduce grace periods from 40 days to 25 days, and drop zero percent interest rate offers. Kookmin Credit Card announced a 20% reduction in its workforce. Korean Exchange Bank Credit Services also plans to cut 20% of its workforce. Samsung Card and Hyundai Card said they will gradually reduce their number of employees.

[1]: http://www.ramreport.com

Details

AMERBANK & SANCHEZ

Warsaw-based Bank Amerykanski w Polsce has licensed the “Sanchez Profile” integrated banking platform through ComputerLand. “Sanchez Profile” is an online, multi-currency core processing system that supports real-time interfaces to third-party lending and payment systems and legacy system components. Each bank branch will be networked to the bank’s operations facility, using “Sanchez Profile for Windows” as the front-end customer-
servicing platform; “Sanchez FMS” for general ledger, financial reporting, and other financial management activities; and “Sanchez CRM” for real-time, single-view customer relationship management.

Details